ILLINOIS CHAPTER OF AMERICAN ACADEMY OF PEDIATRICS Chicago, Illinois FINANCIAL STATEMENTS JUNE 30, 2015 AND 2014

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1 ILLINOIS CHAPTER OF AMERICAN ACADEMY OF PEDIATRICS Chicago, Illinois FINANCIAL STATEMENTS JUNE 30, 2015 AND 2014

2 TABLE OF CONTENTS PAGE INDEPENDENT AUDITORS REPORT...1 FINANCIAL STATEMENTS Statements of Financial Position... 3 Statements of Activities and Changes in Net Assets... 4 Statements of Functional Expenses... 6 Statements of Cash Flows... 8 Notes to Financial Statements... 9

3 CliftonLarsonAllen LLP CLAconnect.com INDEPENDENT AUDITORS REPORT Board of Directors Illinois Chapter of American Academy of Pediatrics Chicago, Illinois We have audited the accompanying statements of financial position of Illinois Chapter of American Academy of Pediatrics (the Chapter ) as of June 30, 2015 and 2014, and the related statements of activities and changes in net assets, functional expenses, and cash flows for the years then ended, and the related notes to the financial statements. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. An independent member of Nexia International 1

4 Board of Directors Illinois Chapter of American Academy of Pediatrics Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Chapter as of June 30, 2015 and 2014, and the changes in its net assets and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated March 1, 2016 on our consideration of the Chapter s internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Chapter s internal control over financial reporting and compliance. a CliftonLarsonAllen LLP Oak Brook, Illinois March 1,

5 STATEMENTS OF FINANCIAL POSITION June 30, 2015 and 2014 ASSETS CURRENT ASSETS Cash and cash equivalents $ 153,530 $ 374,074 Grants receivable 1,153, ,269 Prepaid expenses and other current assets 42,162 8,495 Total current assets 1,349,223 1,154,838 LONG-TERM PORTION OF GRANTS RECEIVABLE, net 982,002 - PROPERTY AND EQUIPMENT 166, ,743 Less accumulated depreciation 147, ,557 Net property and equipment 19,109 19,186 OTHER ASSETS, security deposit 7,333 7,333 TOTAL ASSETS $ 2,357,667 $ 1,181,357 LIABILITIES AND NET ASSETS CURRENT LIABILITIES Accounts payable and accrued expenses $ 49,035 $ 57,635 Capital lease obligation, current portion Line of credit - 100,000 Deferred revenue 114,230 44,220 Total current liabilities 163, ,205 LONG-TERM LIABILITIES Deferred rent 3,851 8,471 Total long-term liabilities 3,851 8,471 Total liabilities 167, ,676 NET ASSETS Unrestricted 195, ,199 Temporarily restricted 1,994, ,482 Total net assets 2,190, ,681 TOTAL LIABILITIES AND NET ASSETS $ 2,357,667 $ 1,181,357 The accompanying notes are an integral part of the financial statements. 3

6 STATEMENTS OF ACTIVITIES AND CHANGES IN NET ASSETS For the Years Ended June, 30, 2015 and 2014 REVENUE, GAINS, AND OTHER SUPPORT 2015 Temporarily Unrestricted Restricted Total Government grants $ 903,393 $ - $ 903,393 Foundation grants 96,582 1,825,936 1,922,518 Membership dues 161, ,429 Contributions 46,231-46,231 In-kind contributions Exhibitor fees 34,745-34,745 Registration fees 32,818-32,818 Interest and miscellaneous income 67,067-67,067 Net assets released from restrictions 495,524 (495,524) - Total revenue, gains, and other support 1,837,789 1,330,412 3,168,201 EXPENSES Program services 1,773,612-1,773,612 Management and general 162, ,372 Fundraising 12,347-12,347 Total expenses 1,948,331-1,948,331 CHANGE IN NET ASSETS (110,542) 1,330,412 1,219,870 NET ASSETS, BEGINNING OF YEAR 306, , ,681 NET ASSETS, END OF YEAR $ 195,657 $ 1,994,894 $ 2,190,551 4

7 REVENUE, GAINS, AND OTHER SUPPORT 2014 Temporarily Unrestricted Restricted Total Government grants $ 1,296,599 $ - $ 1,296,599 Foundation grants 36, , ,623 Membership dues 122, ,695 Contributions 33,012-33,012 In-kind contributions 14,583-14,583 Exhibitor fees 44,965-44,965 Registration fees 52,262-52,262 Interest and miscellaneous income 16,248-16,248 Net assets released from restrictions 574,709 (574,709) - Total revenue, gains, and other support 2,191, ,556 2,335,987 EXPENSES Program services 2,108,539-2,108,539 Management and general 210, ,426 Fundraising 15,153-15,153 Total expenses 2,334,118-2,334,118 CHANGE IN NET ASSETS (142,687) 144,556 1,869 NET ASSETS, BEGINNING OF YEAR 448, , ,812 NET ASSETS, END OF YEAR $ 306,199 $ 664,482 $ 970,681 The accompanying notes are an integral part of the financial statements. 5

8 STATEMENT OF FUNCTIONAL EXPENSES For the Year Ended June 30, 2015 Management Program and Services General Fundraising Total Salaries, wages, and benefits $ 1,016,552 $ 75,950 $ 10,310 $ 1,102,812 Payroll taxes 67,844 4, ,064 Bank fees Books 23, ,184 Computer and software 54,506 5,946-60,452 Consulting and professional fees 130,242 19, ,613 Depreciation 6, ,149 Equipment lease and repair 38, ,636 Government affairs and advocacy - 25,000-25,000 Grant subcontracts 4, ,801 Insurance 4, ,734 Interest - 3,738-3,738 Memberships and registration fees 17,389 2,882-20,271 Miscellaneous 14,168 1, ,134 Office supplies 24,231 3,584-27,815 Payroll service 19,964 1,509-21,473 Photocopies 6, ,590 Postage 6, ,079 Printing 84,834 1,876-86,710 Professional development 2, ,849 Publications 1, ,135 Rent expense 71,262 5,129-76,391 Speaker fees 49, ,923 Stipends 1, ,859 Telephone 16,681 1,399-18,080 Travel and meals 98,318 6, ,424 Utilities 9,720 1,354-11,074 Varnish supplies 1, ,450 TOTAL FUNCTIONAL EXPENSES $ 1,773,612 $ 162,372 $ 12,347 $ 1,948,331 The accompanying notes are an integral part of the financial statements. 6

9 STATEMENT OF FUNCTIONAL EXPENSES For the Year Ended June 30, 2014 Management Program and Services General Fundraising Total Salaries, wages, and benefits $ 1,176,426 $ 94,981 $ 13,270 $ 1,284,677 Payroll taxes 76,779 6, ,709 Bank fees Books 16, ,980 Computer and software 31,402 6,970-38,372 Consulting and professional fees 336,756 10, ,844 Depreciation - 25,985-25,985 Equipment lease and repair 25, ,194 Government affairs and advocacy ,500-28,325 Grant subcontracts 50, ,356 Insurance 4, ,994 Interest 662 1,660-2,322 Memberships and registration fees 21,784 2,230-24,014 Miscellaneous 1,673 1, ,034 Office supplies 18,136 3, ,754 Payroll service 21,250 1,787-23,037 Photocopies 7, ,000 Postage 8,627 1, ,869 Printing 31,953 6,835-38,788 Professional development 5, ,100 Publications 6, ,708 Rent expense 75,724 4,963-80,687 Speaker fees 44, ,235 Stipends 5, ,884 Telephone 17,241 1,632-18,873 Travel and meals 110,826 8, ,655 Utilities 9,429 1,254-10,683 Varnish supplies 1, ,368 TOTAL FUNCTIONAL EXPENSES $ 2,108,539 $ 210,426 $ 15,153 $ 2,334,118 The accompanying notes are an integral part of the financial statements. 7

10 STATEMENTS OF CASH FLOWS For the Years Ended June, 30, 2015 and CASH FLOWS FROM OPERATING ACTIVITIES Change in net assets $ 1,219,870 $ 1,869 Adjustments to reconcile change in net assets to net cash provided by (used in) operating activities: Depreciation 7,149 25,985 Effects of changes in operating assets and liabilities: Grants receivable (1,363,264) 212,572 Prepaid expenses and other assets (33,667) 8,085 Accounts payable (8,600) (3,937) Accrued expenses and other liabilities 65,390 (51,879) Net cash provided by (used in) operating activities (113,122) 192,695 CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property and equipment (7,072) - CASH FLOWS FROM FINANCING ACTIVITIES Payments on capital lease obligation (350) (4,200) Net borrowings (repayments) on line of credit (100,000) 100,000 Net cash provided by (used in) financing activities (100,350) 95,800 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (213,472) 288,495 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 374,074 85,579 CASH AND CASH EQUIVALENTS, END OF YEAR $ 153,530 $ 374,074 The accompanying notes are an integral part of the financial statements. 8

11 NOTES TO FINANCIAL STATEMENTS June 30, 2015 and 2014 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Business Illinois Chapter of American Academy of Pediatrics (the "Chapter") was incorporated in the state of Illinois on June 18, 1975 as a nonprofit corporation. The Chapter was organized to promote the attainment by all children of Illinois of their full potential for physical, emotional, and social health. The Chapter, a member organization of the American Academy of Pediatrics (AAP), provides educational programs, communications, and limited advocacy for Illinois pediatricians. The primary sources of revenue consist of program and project grants and membership dues. The Chapter's fiscal year ends on June 30. Significant accounting policies followed by the Chapter are presented below. Use of Estimates in Preparing Financial Statements The preparation of financial statements requires the Chapter to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses, gains, losses, and other changes in net assets during the reporting period. Actual results could differ from those estimates. Basis of Accounting The Chapter s financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America. Basis of Presentation The Chapter follows the requirements of the Financial Accounting Standards Board (FASB) in its Accounting Standards Codification (ASC) No , Not-For-Profit Entities - Presentation of Financial Statements. Under ASC No , the Chapter is required to report information regarding its financial position and activities according to three classes of net assets: unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets defined as follows: Unrestricted Net Assets - Those resources over which the board of directors (board) has discretionary control. Temporarily Restricted Net Assets - Those resources subject to donor-imposed stipulations that may be fulfilled by actions of the board of directors to meet the stipulations, or become unrestricted at the date specified by the donor. When a donor or time restriction expires, temporarily restricted net assets are reclassified to unrestricted net assets and are reported in the Statements of Activities and Changes in Net Assets as Net assets released from restrictions. 9

12 NOTES TO FINANCIAL STATEMENTS June 30, 2015 and 2014 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Basis of Presentation (continued) Permanently Restricted Net Assets - Those resources subject to donor-imposed stipulations that they be maintained permanently by the Chapter. The Chapter had no permanently restricted net assets as of June 30, 2015 and Cash Equivalents The Chapter considers all liquid investments with a maturity of three months or less to be used for operating purposes when purchased, to be cash equivalents. Allowance for Uncollectible Accounts Grants receivable are shown net of the allowance for doubtful amounts. After review of the receivables, no provision for uncollectible accounts was deemed necessary by management as of June 30, 2015 and Property and Equipment Property and equipment are recorded at cost when purchased. The Chapter capitalizes all property and equipment purchases in excess of $1,000. Depreciation is computed using the straight-line method over the estimated useful lives of the assets as follows: Years Office furniture and equipment 10 Computer equipment 5 Leasehold improvements 5 Impairment of Long-Lived Assets The Chapter reviews long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. 10

13 NOTES TO FINANCIAL STATEMENTS June 30, 2015 and 2014 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Grants and Contributions All grants and contributions are considered to be available for unrestricted use unless specifically restricted by donors. Amounts received that are restricted by the donor are reported as increases in temporarily or permanently restricted net assets depending upon the nature of the restriction. Temporarily restricted contributions, whereby restrictions are met in the same year as received, are reported as unrestricted support. When a temporary restriction expires, temporarily restricted net assets are reclassified to unrestricted net assets and are reported in the Statements of Activities and Changes in Net Assets as Net assets released from restrictions. Membership Dues Member dues are recognized over the membership period. Membership dues received in advance are recorded as deferred revenue. Functional Allocation of Expenses The costs of providing various programs and other activities have been summarized on a functional basis in the Statements of Activities and Changes in net assets and categorized on the Statements of Functional Expenses. Accordingly, certain costs have been allocated among the programs and supporting services based on hours incurred and labor dollars by the various services. Income Taxes The Chapter is exempt from federal income tax under Section 501(c)(3) of the Internal Revenue Code. In addition, the Chapter qualifies for the charitable contribution deduction under Section 170(b)(1)(A) and has been classified as an organization that is not a private foundation under Section 509(a)(2). The Chapter evaluates its exposure for uncertain tax positions on an annual basis. As of June 30, 2015 and 2014, there were no liabilities related to uncertain tax positions. 11

14 NOTES TO FINANCIAL STATEMENTS June 30, 2015 and 2014 NOTE 2 - LEASES Operating Leases The Chapter leases its office facility under a lease that has monthly lease payments ranging from $9,752 to $10,345 through April In addition, the Chapter is required to pay its proportionate share of building operating expenses. The Chapter also leases certain office equipment requiring monthly lease payments of $300 through September Future minimum rental payments under existing lease agreements are summarized as follows: 2016 $ 98, , , ,355 Total $ 448,656 For the years ended June 30, 2015 and 2014, net rent expense was $76,391 and $80,687, respectively. NOTE 3 - GRANTS RECEIVABLE Grants receivable consisted of the following at June 30: Illinois Department of Healthcare and Family Services $ 150,000 $ - Charles Marks, Jr. Charitable Trust 1,504,050 - Otho S.A. Sprague Memorial Institute 203, ,586 Chicago Department of Public Health 70, ,703 Health Management Associates 8, ,000 Others 229, ,980 Total grants receivable 2,166, ,269 Less discount to net present value (30,982) - Net grants receivable 2,135, ,269 Less current portion 1,153, ,269 Long-term portion $ 982,002 $ - Long-term grants receivable have been discounted to present value utilizing a rate of 2.1%. They are receivable in less than five years. 12

15 NOTES TO FINANCIAL STATEMENTS June 30, 2015 and 2014 NOTE 4 - PROPERTY AND EQUIPMENT Property and equipment consists of the following as of June 30: Computers and equipment $ 56,007 $ 48,935 Furniture and fixtures 23,308 23,308 Leasehold improvements 87,500 87,500 Total 166, ,743 Less accumulated depreciation 147, ,557 Property and equipment, net $ 19,109 $ 19,186 NOTE 5 - LINE OF CREDIT The Chapter was party to an agreement with South Central Bank that allowed for borrowings of up to $150,000. Any borrowings bore interest at the bank s prime rate plus 1%, but not lower than 5%, and were secured by the assets of the Chapter. The bank s prime rate as of June 30, 2015 and 2014 was 3.25%. At June 30, 2015 and 2014, $0 and $100,000 was outstanding on the line of credit, respectively. The agreement expired on July 1, 2015 and was not renewed. NOTE 6 - DEFERRED REVENUE Deferred revenue of $114,230 and $44,220 at June 30, 2015 and 2014, respectively, consisted of member dues received in advance of the membership period. NOTE 7 - RETIREMENT PLAN The Chapter maintains a tax-deferred compensation plan for the benefit of its eligible employees. Participation by eligible employees is voluntary, and the Chapter matches an amount equal to 50% of the elective deferral up to 4% of an individual s compensation. During the years ended June 30, 2015 and 2014, the Chapter paid $15,682 and $20,183, respectively, of retirement plan expenses, which is allocated among program services, management and general expense, and fundraising expense. 13

16 NOTES TO FINANCIAL STATEMENTS June 30, 2015 and 2014 NOTE 8 - TEMPORARILY RESTRICTED NET ASSETS Temporarily restricted net assets were available for the following purposes at June 30: Obesity $ 345,124 $ 374,722 TEAM QICME 720,700 - TEAM Adolescent Pregnancy 752,368 - Youth Transitions 8,399 17,980 Understanding Genetic Informaion in Private Care Practice 4,661 - Enhancing Developmentally Oriented Primary Care - 14,551 Oral Health 141, ,869 Medical Home 13,368 68,657 Bright Futures 2,494 3,066 Early Childhood Policy 4,413 13,821 Literacy Promotion 1,782 38,816 Total temporarily restricted net assets $ 1,994,894 $ 664,482 NOTE 9 - SIGNIFICANT CONCENTRATIONS Approximately 46% of the Chapter s revenues, gains, and other support for the year ended June 30, 2015 was provided by one grantor. There were no significant concentrations for the year ended June 30, NOTE 10 - SUBSEQUENT EVENTS Management evaluated subsequent events through March 1, 2016, the date the financial statements were available to be issued. Events or transactions occurring after June 30, 2015, but prior to March 1, 2016 that provided additional evidence about conditions that existed at June 30, 2015, have been recognized in the financial statements for the year ended June 30, Events or transactions that provided evidence about conditions that did not exist at June 30, 2015, but arose before the financial statements were available to be issued have not been recognized in the financial statements for the year ended June 30, Management has determined there were no events or transactions which would require disclosure in the financial statements either individually or in the aggregate for the year ended June 30, This information is an integral part of the accompanying financial statements. 14